Obviously, businesses are primarily driven by their bottom line. But first, let’s think about why potential competitors might be tempted to enter your market. We’ll get to how easy or difficult it is for new competitors to enter your industry in a minute. Why Would New Entrants Want to Challenge You? Just think of the massive disruption currently taking place in the healthcare, education and financial services arenas as technology changes the service area for these industries from local to international. These days technology drives must of that competition. You might feel safe and comfortable with your market share relative to your existing competitors, but there is always the chance that new competitors could enter the fray. Competitive rivalry is the level of competition among your existing competitors. We previously looked at competitive rivalry, and we noted that the threat of new entrants is easier to understand once you grasp competitive rivalry. Today, we’re diving deeper in the threat of new entrants. We’ve provided a broad overview of the tool in the past, but we’ve recently been taking time to look at each individual force in greater detail.
For example, you might use the framework to determine the attractiveness of starting a soft drink company, as opposed to investing in PepsiCo versus The Coca-Cola Company. Porter’s framework is designed to look at the competitiveness of a particular industry, as opposed to companies within that industry. The framework is a great way to look at the competitive landscape. Any business school graduate has probably had a healthy dose of Michael Porter’s Five Forces, and for good reason.
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